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Coventry Slaps DDR With $500M Suit

NEW YORK CITY-The lawsuit filed in State Supreme Court alleges mismanagement of 12 retail properties; a DDR spokesman denies the allegations.

By Paul Bubny | Updated on November 05, 2009

NEW YORK CITY-Coventry Real Estate Advisors filed a $500-million lawsuit Wednesday against Developers Diversified Realty, alleging that DDR committed fraud, malfeasance, mismanagement, violation of fiduciary and contractual obligations and self-dealing in a dozen retail properties DDR was leasing and managing for Coventry. In a release, locally based Coventry said it had terminated DDR as leasing and managing agent of those assets. A spokesman for DDR denies Coventry’s allegations.

The complaint against Cleveland-based DDR, filed Wednesday in New York State Supreme Court here, says that although Coventry negotiated for “first class” leasing, management and development services on the properties, DDR failed to provide them. Further, the complaint says that DDR “left Coventry in the dark” when it came to financial, development and leasing reports on the properties, which the two companies acquired between 2003 and 2006 in a co-investment agreement.

Also alleged in the complaint is that DDR’s intent was “to allow the properties to flounder and ultimately fail, while focusing on its real goal: collect as much in fees as possible while making only the most cursory effort to perform its responsibilities.” The rationale, according to the complaint, was that DDR as a publicly traded company wanted to boost its short-term earnings “without regard for the long-term health of the properties.” Coventry is seeking at least $500 million in consequential and punitive damages, according to the complaint.

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